What is NCD (Non Convertible Debentures)? – Meaning & Features| IndiaNivesh

Posted by Mehul Kothari | Published on 23 Sep 2019
Image
What is NCD (Non Convertible Debentures)? – Meaning & Features| IndiaNivesh

What is NCD (Non Convertible Debentures)

Investors are continually looking for new investment avenues, especially in a market where conventional investment instruments and sometimes falter in a volatile market. One such attractive proposition that can help you manage liquidity and risks while offering significant profits are nonconvertible debentures (NCDs).
What is NCD?

Nonconvertible debentures meaning, NCDs are financial vehicles issued by reputed companies for a specified period of time with a guarantee of a fixed interest to investors. Unlike standard debentures, nonconvertible debentures cannot be transformed into equities or company shares.

The company that issues the NCD decides on the interest rates. On maturity, investors receive the principal amount and the interest together. Nonconvertible debentures can be held by individual investors, banking institutions, primary dealers, unincorporated establishments, registered corporate bodies and other bodies incorporated in India.

Companies issuing upcoming non convertible debentures in the market, do so to raise funds from the public. These NCDs can be secured or unsecured. Secured nonconvertible debentures are supported by the issuing company's assets to accomplish the debt responsibility. Hence, if the company fails to pay its investors, they can claim the payment by liquidating the company's assets. On the other hand, unsecured NCDs are ones that are not supported by the company's assets. Thus they hold far higher risk than secured NCDs.

Features of nonconvertible debentures:

Interest rates
Typically, the interest rate of NCDs overs between 10 to 12%. Fixed deposits on the other hands could offer a maximum of 8% returns. Hence, compared to most investment options, NCDs can be lucrative due to its high-interest rates. However, how credit rating agencies grade a company’s NCD can be inversely proportional to the interest, it provides. For instance, a highly rated NCD could provide low-interest rates. But compared to corporate fixed deposits, bank fixed deposits and government bonds that give a maximum of 8% returns; nonconvertible debentures offer returns up to 11%, which makes it an attractive investment instrument.

Pay out options
If you are looking to invest in nonconvertible debentures, you can benefit from a variety of interest pay out options such as on a monthly basis, quarterly, six-monthly or annual basis. Typically, NCDs could mature from 90 days to 20 years. Hence, you have the opportunity and flexibility of choosing short and long-term tenures depending on your investment objectives.

Liquidity
Non convertible debentures are listed on stock exchanges and offer secure withdrawal options. Redeeming your investment from NCDs can be easier than bank fixed deposits, and hence, can be considered as providing better liquidity than FDs.

Issuance
A company that offers nonconvertible debentures through open issues can be purchased within a specified timeframe. Similarly, NCDs can also be purchased from the stock market. To understand what is ncd in stock market, you may want to look into the open stock market and exchanges for easily tradable NCD options.

Stringent credit rating

NCDs are only authorised to be issued by companies that have good credit ratings. Credit rating agencies rate NCDs and revise ratings regularly.

Things to consider before investing in non convertible debentures

It is critical to understand how NCDs can be vulnerable to risks. These risks could be related to how a company's business is handled and how it utilises its funds. An NCD’s credit rating could take a hit if the company's turnover is impacted negatively. To address the impact, companies then borrow additional funds from banks and lending institutions. This is why it is critical to consider a few points before investing in nonconvertible debentures. These include:

Issuer's credit rating
Opt for a company that has a credit rating of AA and above. The score is a crucial indicator of the company's potential to raise funds from external and internal operations. The rating is also evidence of the company’s sustainability. Credit rating is a valid parameter that can expose the financial position of the company.

Debt levels
It is essential that you conduct background checks on the asset quality of the organisation if you are considering to invest in its nonconvertible debentures. If a company is allocating more than 50% of its entire assets in unsecured loans, it can be a sign to stay away from such companies.

Understanding CAR
Capital Adequacy Ratio or CAR looks into the company's capital and calculates if it has adequate funding to outlive potential losses. It can be an excellent idea to look into the company you plan on investing to see if it has at least 15% CAR. Alternately, you must also ensure that the company has historically maintained the CAR over a period of time.

Looking to NPAs
A company issuing NCDs must set aside at least 50% of their assets towards Non-Performing Assets or NPAs. This can be an optimistic indicator of the company's asset quality. In the event that the company's quality declines due to bad debts, you may want to take it as a warning.

Gauging ICR
A company's ability to settle the interest on any of its debts at any given time can be witnessed in its Interest Coverage Ratio or ICR. The ICR of a company reveals how it can handle potential non-payments.

Tax bracket
If you belong in the 10% and 20% tax plan, you may find nonconvertible debentures as a lucrative investment option. This is because, if your tax bracket is low you stand to earn more from NCDs.



Conclusion
There is a marked difference between fixed deposits and non convertible debentures. It can be an excellent idea to look into specific factors before selecting an NCD as an investment option. Consider the company's financial health and how it employs its funds if you notice a diversion from its core business; it can be a sign to stay away from the said company. Going through the credit rating of companies can also give you a fair idea of how your investment is secured. For instance, you may want to steer clear from companies that have low ratings but temptingly attractive, high returns. Such propositions could be risky in the long run, especially if the overall financial health of the company is not stable.

 

Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

PREVIOUS STORY

Share Market - How to invest in share market

Mehul Kothari द्वारा पोस्ट | 23 Sep 2019 को प्रकाशित |

Have you been thinking about buying shares but do not know how to invest money in the share market? Then you have come to the right place. In this article, we will tell you all that you need to know regarding the DOs and DONTs and how to invest in the share market. Why is an investment in the share market a smart decision?Many market experts feel that investing in the share market is the only towards building real long-term wealth. Read on to know the top reasons why you should venture into the share market and the benefits associated with it:• Ownership (at least a certain percentage) With shares, you gets the twin benefits of dividend and ownership. • No need for negotiation In the case of shares, you see clearly what you need to pay. There are no hidden charges or scope for negotiation. This makes the buying process quicker and more transparent. Brokerage or such associated costs are also minimal. Hence, you can be assured that a big chunk of the investment does not go towards associated costs or operational expenses. • Potential for a higher return Share markets have the potential to generate a much higher return than conventional investment avenues such as Bank deposits, Fixed Deposits, etc. You just needs to choose the right stock to invest in and be willing to absorb some degree of risk. Investments in the share market bear extremely sweet fruits for you in the long-run. How to invest in the share market?Before we answer your question on how to invest money in the share market, you need to know the pre-requisites and procedures involved.• Identity Proof (PAN Card or Aadhar Card) To be eligible for investment in the share market, you need to have a PAN Card or an Aadhar Card. These are mandatory documents for the Know Your Customer (KYC) process of SEBI. Also as per the new rules for opening a Demat account, one needs to furnish a canceled cheque along with your bank statement (for the last six months).It is also important to make sure that the information mentioned in these documents is correct and up-to-date. So, You must check the details such as name spellings, contact details, etc. to ensure there are no issues later. • Contact a broker Trading on the share market is not open to all individuals. Only some people are authorised (by the central regulator –SEBI) to perform trading (buying and selling) of securities. These intermediaries are referred to as brokers. They can be individuals, firms or agencies registered with SEBI. Hence, any interested investor needs to reach out to a broker to invest money in the share markets. They also assist the investors in completing the formalities involved in making investments in the share market.Brokers levy a service charge or brokerage for rendering their services to the investors. • Demat and Trading AccountA Demat account is an account that will hold the shares in a non-physical electronic format. The Demat account number needs to be quoted for all stock market transactions to allow electronic settlements. It is mandatory to have a Demat account to trade on the share market. Shares can no longer be held in physical format. Similar to a bank passbook, any transactions (buying or selling) will be debited or credited in the Demat account. A trading account is used to place the trade (invest or sell) orders in the share market. Its purpose is different than a Demat account. A Demat account acts as the bank in which shares purchased are deposited and shares sold are taken out. It is a storage house. Trading Account, on the other hand, facilitates the trading process and acts as the link between the Demat account and the bank account. • Unique Identification Number (UIN) A UIN is required if the value of a single transaction reaches or exceeds Rs. One Lakh. For transactions below that limit, UIN is not needed. • Depository Participants (DPs) There are two depositories in India – CDSL (Central Depository Services Limited) and NSDL (National Securities Depository Limited). They act as a link between the listed companies and their shareholders. Depositories issue the shares through authorised agents known as Depository Participants (DPs). DPs can be banks, individual brokers or financial institutions. They are accountable for the final transfer of the securities. Once you have all the above things in order, you are ready to know how to invest in the share market online. All you need to do is:1. Scan the market and identify the shares or securities that you would like to invest in. One must ensure that the investment decisions are in line with the goal, investment strategy, risk profile, and investment horizon. 2. Inform the stockbroker about the details of the investment to be made. These include the name of the organisation to invest in, the number of securities to be purchased and the entry price. For instance, you want to purchase 1000 shares of a company that is currently trading at Rs. 750. However, you want to get in at an entry price not more than Rs. 600. You can instruct your broker to invest as soon as the price comes down to that level. 3. In case if any of the buy or sell orders reach their expiry date, the broker informs the investor regarding the same. 4. Once the transaction is complete, it reflects in the Demat account. 5. Dividends on shares held are directly credited to the linked bank account. Share Market Investment TipsHere are some share market investment tips to make your experience smooth and fruitful:• Do not get swayed with promises of guaranteed return. In the share market, there are no minimum or definite returns.• Check the credentials and track record of the intermediaries that you partner with. One should only deal with intermediaries who have the necessary authorizations and are registered with statutory bodies such as SEBI or stock exchange.• In the case of securities, "one size fits all" does not hold true. Hence, ensure that the investment decisions are in sync with your risk profile.• Not everything that shines is gold. Be cautious of securities that exhibit a sudden increase in trading activity or price. Also, before investing in low-priced stocks one must conduct a due-diligence of the concerned company. It is important to make sure that the price fall is justified by internal or external factors.• Maintain copies of all investment-related documentation (application forms, contract notes, communication to companies, brokers, etc.)• Do not invest in the share market based on market rumors. Similarly, do not panic sell in case the market goes down. Impulsive decisions are not fruitful for most investors. • Always check the instructions given to the broker and their understanding of the same. Now you know everything about how to invest money in the share market. However, make sure you invest adequate time and effort in choosing your broking partner. The right firm or individual can help you make the right decisions in the share market. One name that you can depend on, for these services in IndiaNivesh. Their rich experience and technical expertise enable investors to maximize the potential of their investments. They also conduct extensive research on markets and various players.So, what are you waiting for? The share market has something for everyone.Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

अधिक पढ़ें

NEXT STORY

Gold Exchange Traded Funds (Gold ETFs) - Overview & how to invest in it

Mehul Kothari द्वारा पोस्ट | 16 Oct 2019 को प्रकाशित |

Gold Exchange Traded Funds (or Gold ETFs) combine the two passions of many investors – stock trading and gold investments. They provide a channel through which you can be a part of the bullion (gold) market. The investor’s funds are invested in gold stocks but there is no physical delivery of the yellow metal. They are often referred to as open-ended Mutual Funds that invest the corpus in gold bullion. Key highlights of Gold ETFs: Gold ETFs in India started in the year 2007. Slowly but steadily they have started gaining momentum. Some of the key benefits offered by Gold Exchange Traded Funds are:1. Transparency: Transparent pricing is one of the USPs of Gold ETF. Like stock prices, information about gold prices are easily available to the general public. You can easily determine the value of their portfolio by checking the gold prices for that time or day.2. Ease of trade: Just like shares, Gold ETFs can be easily traded on the stock exchange. You need to buy a minimum of one gram of gold which is equivalent to one unit of Gold ETF. Investors can invest in Gold ETFs from any location in India. Moreover, the difference in price (due to GST) will not be applicable.3. Cost efficiencies: Unlike many investment avenues, there are no entry or exit loads with Gold ETFs. The only cost involved would be the brokerage fees. 4. Risk: Unlike physical gold, there are no storage hassles or theft fears with Gold ETFs. Additionally, gold prices are not prone to frequent fluctuations. This makes Gold ETFs a relatively safer choice. 5. Tax efficiencies: Gold ETFs do not attract any wealth tax or securities exchange tax. Also, if they are held for a period of more than one year, the gains are treated as long-term capital gains. For anyone interested in holding gold, these ETFs provide a tax-efficient alternative. 6. Diversification: Gold ETF investments can help to bring diversity in the investment portfolio. During volatile market conditions, they can help to stabilise or improve the overall returns for you.7. Collateral: Gold ETFs are accepted as security collaterals for loans or capital borrowings by many financial institutions. Why is investing in Gold ETFs better than traditional forms of gold? You do not need to worry about impurities or adulteration in the metal As ETFs are held in electronic form, there are no storage related issues or costs Easy trading on the stock exchanges and hence high liquidity Real-time tracking of investments No mark-ups costs such as making charges, wear and tear involved The price of Gold ETFs remains the same throughout the country. However, the gold prices can vary from one location to another.  How does Gold Exchange Traded Fund work? The investment is converted into unit of gold basis the cost applicable at the allotment time. For instance, the cost of gold (per gram) on a particular day is Rs. 3000. Ms. X wants to invest Rs. 60,000 in Gold ETFs. Her investment amount will get translated into 20 gold units. At the back-end, physical gold acts as security for these ETFs. For example, if you invest in Gold ETFs, the entity at the back-end purchases gold. They act as the custodian for the investment and also guarantee for the purity of the metal. The stock exchanges assign the responsibility of buying and selling gold to authorised members or participants which in turn can be used to issue ETFs. These are usually large companies. As a result, these authorised members ensure that there is parity between the gold cost and ETFs. How to invest in Gold ETFs? Gold ETF investments are a simple affair.1. Choose a broker or fund manager: Many financial institutions (including banks) offer Gold ETF products. Similar to the online share trading, you would need to reach out to a fund manager or a firm which will trade on behalf of you.2. Demat and Trading Account: In order to invest in Gold ETFs, you need to have a demat account and an online trading. You can apply for these accounts online with the broker or such service provider by providing details like PAN, Identity Proof, residential proof, photograph and a cancelled cheque (for bank account linkage).3. Online Order: Once the accounts are in place, you can select the desired Gold ETF and place the order through the broker’s online portal. You can also opt for Mutual Funds which have an underlying Gold ETF.4. Confirmation: The placed orders are then routed to the stock exchange. The purchase orders are matched with the corresponding sell orders and accordingly executed. A confirmation email or message is sent to you. Who all should invest in Gold ETFs? Gold is a relatively safe and stable investment. Its prices do not fluctuate as much as equities. Hence, Gold ETFs can be a good choice for you, if you do not want to take too much risk. Additionally, since these ETFs are tradeable easily on the stock exchange, they are useful if you are looking for an investment opportunity with high liquidity. Hence, it is a good option for you to diversify your portfolio. So, if you meet the requisite objective of investment, Gold ETF is a good option for you as well. Things to keep in mind while investing in Gold Exchange Traded Funds Here are some tips that you could use while investing in Gold ETFs Gold is generally considered as a stable asset. However, you should not forget that the Net Asset Value (NAV) of Gold ETFs can also fluctuate basis market volatility As an investor, you need to bear brokerage fees or commission charges for Gold Exchange Traded Funds. Hence, you should check these costs while deciding on the broker or fund manager However, you should not make the decision on the basis of price alone. Consider the broker/ fund house’s past track record, services provided, type of clients handled etc. before choosing the service provider Do not over-invest in Gold ETFs. It is usually suggested to restrict investment in these ETFs to 10% of the entire portfolio. Final Words A smart investor knows that all that glitters is not gold. A good fund manager or firm helps choose the best Gold ETF products in India. IndiaNivesh, a well-known financial services company can help in this regard. With their rich experience in the Indian market and in-depth understanding of the financial ecosystem, they have helped numerous customers to grow their wealth and fulfill their financial goals.Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

अधिक पढ़ें

Are you Investment ready?

*All fields are mandatory

related stories view all

  • Mutual Funds KYC - Know about How to do KYC for Mutual Funds
    Posted by Mehul Kothari | Published on 19 Sep 2019

    How to do KYC for Mutual Funds Recent media accounts reported that mutual fund industry now has over Rs. 23 trillion in Assets Under Management (AUM) in February 2019 alone. This could be considered to be a sign that an increasing number of people are taking financial planning earnestly and are setting distinct financial goals for their future.With regards to secure investment schemes that provide above-average yields, mutual funds beat most other options to stand out as the emerging winner. Given the effortlessness through which one can invest in mutual funds, an upbeat market and a wide variety of mutual fund types make it an attractive investment proposition for new and seasoned investors alike. If you are looking to invest in mutual funds, first and foremost, it is essential to know that you can only invest in mutual funds if you are KYC compliant.Understanding KYC for mutual fundsKnow Your Customer, also known as KYC, enables financial institutions to validate your identity. As a first-time investor, you must undergo the KYC process before transacting in a mutual fund. Because it is a mandatory customer identification process, it is critical to submit your identity details to a mutual fund house, a stock broker like IndiaNivesh or any other financial institutions. This is because, according to the Prevention Of Money Laundering Act, 2002, AMCs must abide by the rules and guidelines established by the Act to implement a Customer Identification Proof. Furthermore, there are specific requirements prescribed by SEBI concerning KYC norms of financial institutions and intermediaries to know their customers. KYC for mutual fund requirements are typically in the form of verifying the customer's identity and address, financial standing, occupation and vital demographic data. These rules and regulations are continually updated by SEBI periodically.Valid from January 1, 2012, every investor regardless of the investment amount in mutual funds must comply with KYC to carry out any transaction. Since money laundering is a major issue worldwide, mandating KYC formalities is regarded as an efficient way of preventing illegal activity. The chief objective of the KYC process is to ensure that a real person or individuals are making investments rather than fictitious names. Every mutual fund investor must adhere to the KYC procedure via a KYC Registration Agency (KRA). This information held by the agency is stored in a single repository for all fund houses and intermediaries to access. Examples of these agencies include NSE, CAMS and KDMS.Documents required for KYCTo initiate your KYC process, you must submit the following documents along with the KYC application form and passport size photograph. Documents include:• Identity proof such as driving license, passport copy, voter ID, Aadhar card, bank photo passbook, or PAN card• Address proof such as recent landline or mobile phone, passport copy, electricity bill copy, voter ID, driving license or Aadhar cardTypes of KYC proceduresTypically, you can complete the mutual fund kyc form either through the off-line or online method. CDSL Ventures Ltd has been nominated and authorised by the mutual fund industry to conduct the Know Your Customer procedure.Off-line method• Visit the CDSL Ventures website and download the KYC application form• Fill in the details• Submit the signed application form through the specified mutual fund authorities or intermediaries• Provide identity proof and address proof and the passport size photograph to go along with KYC form• The duly filled form can be physically submitted at any of the following places. These include the Asset Management Company (AMC) through which you are making the investment or the Registered Transfer Agent  (RTA) such as CAMS.Online Method• Create an individual account on the official website of the KRA. Fill in your credentials to initiate the online kyc for mutual fund• Key in your registered mobile number and enter your Aadhar card number• Verify the details through the OTP sent on your registered mobile number• Upload a self-attested copy of your e-Adhaar• Accept the consent declaration terms for the eKYCAadhar based KYC through biometricsYou can also opt for Aadhar based KYC if you have the Aadhar card. Request the fund house or agency to send their representative or an official to visit you personally and collect the details from you in person. You can submit a copy of your Aadhar card to the representative, and they will enter your biometric information on the scanner and link it to the Aadhar data repository. As your fingerprints get matched to the database, your credentials stored with the Aadhar database will reveal that your KYC has been validated. This process can ensure that you can go ahead with your mutual fund investment.KYC for non-individualsHowever, if the investor is not an individual, the KYC process must be completed in a different manner. For instance, here are some cases on how to complete the KYC based on the following:• Joint applicants. All or both applicants in a joint applicant setting must complete the KYC individually.• Power of attorney. The power of attorney holder and investor must complete the KYC process individually.• NRIs/PIOs. All NRIs and PIOs must complete the KYC formalities individually.• Minors. If a mutual fund investment is being made on behalf of a minor, the parent or legal guardian who wishes to operate the account on behalf of the minor must complete the KYC procedure. When the underage individual attains adulthood, he or she must complete the KYC formalities at the time.It is important to note that if any KYC documents are found incorrect, insufficient or not in order, the investor's compliance status can get cancelled. Under such a situation, the investor is informed of the status by the relevant authority.To know your mutual fund kyc status and the progress of your KYC process, you can check on the following websites. Here, it is important to note that you can visit any of the below sites depending on where you have given the KYC application form:• CDSL Ventures Ltd. CVL - https://www.cvlkra.com/ • NSE (DotEx International) - https://www.nsekra.com/ • NSDL Database Management Ltd (NDML) - https://kra.ndml.in/ • CAMS - https://camskra.com/Home.aspx • Karvy - https://www.karvykra.com/To know more about your mf kyc status, you can visit any of the above sites and enter your PAN number.Conclusion On completing the KYC procedure successfully, you will be able to purchase mutual fund units from your respective AMC or RTA. You can freely invest in a wide variety of mutual funds of your choice and any amount, after completing your KYC formalities.   Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

    read more
  • What is Intraday Trading?
    Posted by Mehul Kothari | Published on 13 May 2019

    What is Intraday Trading and How to Do It?Stock market offers numerous opportunities to traders. In fact, it is one of the daily sources of income for many people. The reason why stock market trading is popular is because it has potential to generate enormous wealth. Moreover, with the right trading strategy in place, the sky is the limit for making profits. In this article, we will learn about intraday trading meaning and its related concept.Let us first learn about what is intraday trading.What is Intraday Trading?Intraday trading or day trading is buying and selling the stocks or securities on the same day. To put it in simple words, intraday trading is squaring off the transaction on the same day it takes place. The main objective of the trader in intraday trading is to book profits on the same day and not carry any overnight position in the market.As you are now very well aware of the intraday meaning. Let us read about some tips that would help you in becoming a successful intraday trader. The tips for Intraday Trading are as follows;Intraday Trading Tips• Trade in Liquid StockSince intraday trading involves squaring off the transaction on the same day, trading in liquid stocks is recommended. Liquid stocks means the stocks that have higher volume and one can easily find buyers and sellers for these stocks. Intraday trade can be settled only when there are sufficient buyers or sellers to purchase or sell a stock. This is possible only when the trading volume is high in stock. • Follow the NewsAnother important intraday trading tip is following the news regarding stocks. Stocks which are in news are often the most volatile. Intraday traders want to trade in volatile stocks due to big price movement which gives them immense opportunities. Also it is easy to predict the price movement of the stocks that have news inflow. A positive news brings the price up whereas a negative news brings the price down. • Technical ChartsTrading on the basis of technical chart reading is always the best. Charts help in predicting the future price movement. The different patterns on the chart suggest the possible future movement in the stock price. Technical chart reading is possible only after good training. If you want to trade in stocks on the basis of chart reading, you can open a demat account with IndiaNivesh. • Prepare a Trading ListTrading in a particular script or stock gives you a better hold of those stocks. You are able to easily predict the price movement in those stocks and trade accordingly. One can prepare a trading list after detailed analysis and in-depth study of the stocks. • Resistance LevelsAnother important intraday trading tip is trading as per the resistance levels of the stocks. The resistance levels of the stocks is that level beyond which the stock does not move. A trader keeps a watch on the resistance levels of the stock and then takes a trade. When the stock breaks the resistance levels, the trader quickly takes a position in that stock and grabs the advantage of sudden price movement. • Top Gainers and Top LosersTop gaining and losing stocks of the day offer immense opportunity to traders to trade in them and make a good profit. However, the selection of stocks for trading must be done carefully. Blindly following the list of top gainers or losers for intraday trading can lead to heavy losses and wipe out your capital. • Weekly Movement of StocksThe traders often trade in stocks after seeing their weekly price movement. They take the position in the stocks after studying the weekly close of the stock price. A detailed analysis of stocks suggests which stocks are suitable for intraday trading. As you are now aware of the tips for intraday, let us have a look at how to do intraday trading.How To Do Intraday TradingThe first and foremost requirement for Intraday Trading is to open a trading and demat account. The demat account can be opened with any broker who provides these services. Selection of a broker must be done by comparing the brokerage rates and services offered by the different brokers in the market. IndiaNivesh is one such broker that provides hassle-free services at competitive rates. After opening the demat account, the beginners in the stock market must know when they can execute intraday trades and the timings of the market. Timings of the Stock MarketThe stock market in India is open from Monday to Friday. Saturday and Sunday are holidays. The stock markets opens at 9 a.m. and closes at 3.30 p.m. The intraday traders can take positions in the stocks during the above-mentioned time period. It is recommended by the experts to avoid taking any trade position during the first trading hour of the market as during that time the stock market is volatile and taking an intraday position can be a risky strategy.Let us now have a look at the benefits of intraday trading.Benefits of Intraday Trading There is no risk of taking overnight positions in intraday trading. Any adverse event after the closure of the market does not affect the intraday trader. In intraday trading, traders have higher margin in comparison to the investors. The potential of Intraday Trading to generate returns is very high. If right trades are taken, an individual can make fortune out of intraday trading. The brokers often give a discount to the intraday traders and charge lesser brokerage. The goal of the Intraday Trading is to generate higher profits. If you are a beginner in the stock market, you can start intraday trading with lower amounts initially. And when you are well equipped, you can slowly increase the trading amount. All you need to do is trade in the right stock and understand the correct entry and exit points of the stock.Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

    read more
  • Know the difference between Demat Account and Trading Account
    Posted by Mehul Kothari | Published on 18 Apr 2019

    If one wishes to invest or trade in the stock market, there are two types of accounts that need to be opened. These accounts are demat and trading account. These two accounts are different in their uses but both are necessary for investing in the stock market. What is trading account? In earlier times, trades used to take place between brokers who acted on behalf of their clients. These trades used to happen on an open floor and brokers used to call out the prices of their orders. When two brokers found the right price for their orders, they would transfer the share certificates and the funds and the transaction would get complete. With the digital revolution and online trading, the open outcry method for transacting has become completely obsolete. With all the stock exchanges going completely online, these manual trades by brokers has been replaced by online trading through the trading account. Read more about online share trading here. The trading account is an account used to purchase and sell – 1. Equity shares2. Equity, Debt and Hybrid mutual funds3. Bonds4. Government securities5. Derivatives6. Commodities7. Currencies8. ETFs9. Other instruments traded on the stock exchange Using a trading account to buy and sell is extremely simple. Each broker offers their own trading system through their website or mobile application. These trading systems are connected to the stock market’s proprietary online systems. This offers a price matching system. An investor or trader just has to put in his order request and when the system matches the price and quantity for the order, the order gets executed. This order matching system provides seamless execution of transactions without any human intervention. The trading account is basically a link between your demat account and the exchange’s order matching system. Once the trades get cleared at the exchange, the shares or other instruments are debited and credited from the respective demat accounts. The trading account makes it extremely simple to buy and sell any investment. Since most of the investments are listed on the exchange, price discovery is easy and transparent. All you need to do is select the instrument you want to purchase and the price, and the exchange’s order matching system will ensure the transaction goes through. Brokers charge brokerage for transactions executed through the trading account. Along with that, there are exchange fees and securities transaction tax that is levied on each transaction. What is demat account? A demat account is an electronic record or repository of the financial instruments owned by an investor or trader. It shows the different investments made, the date of purchase, the price at which it was purchased and the current market price. This account allows the investor to hold shares and securities in an online form. Physical securities held by a person can be dematerialised into their electronic form and held in the demat account. One of the primary advantage of a demat account is that your shares are safe. Shares in their physical form can get damaged or lost. But shares in your demat account are safe and you don’t need to fear losing them. A demat account, like any other account, lets you easily scan all the transactions. A demat account will show the current market value of all investments held in that account as on a particular date. It also shows whether a share is partly paid up or fully paid up, thus providing clarity to the investor. However, unlike a bank account, a demat account can have zero shares or securities and still be functional. A demat account is a very convenient way to handle all investments. Unlike earlier times where all securities were in physical form, a demat account holds everything in electronic form. This makes it very convenient to handle and operate. A demat account offers all facilities like a normal bank account such as nomination facility, joint accounts, change in name and address etc. A bank account is usually linked to a demat account, which makes it easy for dividends and interest to get credited to the investor’s account directly. Read more about a Demat account here. Trading account vs demat account The difference between trading account and demat account is simple, a demat account is an online account for storing shares and securities. A trading account is an account for purchases and sales of investments. A trading account inherently has no balance. It draws from the demat account once the purchase or sale transaction has gone through from the exchange’s side. A trading account also cannot exist in isolation. It has to be linked to a demat account from which the required shares or securities can be debited or credited. A demat account can exist without having a trading account. An investor can just invest in IPOs or Mutual Funds through a broker and hold these units in his demat account. However, to sell these units, a trading account will be needed. The difference between demat and trading account is very fine. However, it is essential to know how these two accounts operate and what their nature is. This understanding will help you open these accounts and get started with your investments. How to open a trading account: 1. Select a broker of your choice like IndiaNivesh Securities Ltd. Bear in mind that each transaction requires a certain brokerage so be sure to research about the different brokerage rates for both delivery based trades and intraday trades. 2. Check the services offered by each broker. Make sure you choose a broker who provides extensive customer support, especially if you are a beginner. A good broker who provides detailed research reports could be the difference between earning profits and earning wealth. 3. Fill in the account opening form and provide the mandatory KYC details. If you have a demat account with the same broker, the KYC details may be exempted, but that depends on the broker. Some of the KYC documents required are:a. Identity proof (Aadhar Card, Passport, Voter ID, Driving License, PAN card)b. Address proof (Aadhar Card, Passport, Voter Id, Driving License, Electricity bill, Gas bill, Telephone bill, Rental agreement, Loan agreement)You will need to submit a proof of income i.e bank statements, income tax returns, Form 16 etc. 4. You will also need to submit passport size photographs. 5. Some brokers request a verification check and witnesses while filling up the account opening form6. Once the broker processes your application, you will get details about your trading account7. You also need to link your bank account to your trading account so that funds received from a sale can be credited into the bank account. 8. Once you receive these details, you can start trading. However, before you execute any trades, you must know where you are investing and what your investment strategy is. Without knowing this, it is very easy to lose money in the stock market, especially while engaging in intraday trades which is susceptible to price fluctuations. Now that you know the difference between these accounts, why not open a demat and trading account with a reputed broker like IndiaNivesh Securities Ltd.Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.

    read more